“Letter from Asia” published in L’Opinion, 24th May 2023.
Western companies in China must deploy all their skills of perception in order to get a clear insight into China’s paradoxes. 2023 is the year in which to take decisions that will have a crucial effect on the coming decade.
It is quite an achievement to gain clear insight at the age of 10! Congratulations to the editorial staff of L’Opinion, whose readers will certainly need to be clear-sighted in analysing the recent developments in China. In order to do so, they will have to distance themselves adequately, go into considerable detail, and be courageous in any action they take.
First of all, one needs to be clear-sighted enough to stand well back when looking at what is happening now, because it is only from afar that the whole picture comes into view. Such detachment is essential in order to understand that last October’s 20th Party Congress was a real break from the past: China has put an end to a 20-year period of opening up, and is prioritising self-sufficiency. It now measures success by the degree to which the rest of the world is dependent upon it; the “fortunate globalisation” of the last two decades is being obliged to step down in favour of the “Global South”, so as to achieve a new world balance in face of the hyper-powerful United States. Having insight also means being able to anticipate the consequences — in all sectors — of the war economy which is bringing about a powerful transfer of value from demand to the constraints of supply. China has the firm intention of being the major beneficiary of this, to compensate for having been under-remunerated during the last two decades.
China has put an end to a 20-year period of opening up and is prioritising self-sufficiency. It now measures success by the degree to which the rest of the world is dependent upon it.
Having insight also means picking out the main message from an overwhelming amount of information coming in daily. In the first quarter of 2023, the media were all saluting China’s promising recovery as shown in the 4.5% increase in its GNP. However, anyone clear-sighted would have noticed the significant figure — that of 0%: the lack of any growth in private investment since Chinese entrepreneurs had lost all confidence in the new government. You would have to be a genius to give a precise description of what this 20% of world GNP will look like in the hands of people who openly call themselves “neo-Marxist-Leninists”. Having insight also means being able to take an objective view of the new “Empire of Paradoxes”, in which a series of bankruptcies of local authorities, a massive fall in population, and poor growth in productivity go hand in hand with world domination in the industries of the future — particularly in environmental transition — and diplomatic successes like the “Global South”.
European businesses have to be clear-sighted enough to take some big decisions now, with effects that will last for the coming decade, because the four choices still open to them may have further restrictions placed on them in 2024 by the “New China”. The first choice is to leave, if the future depends on bidding for public tenders that they will never win. The second is to associate with local public authorities; this would simply mean going back to the joint venture model of 30 years ago, which had a very low success rate. The third choice is to lie low and invest one’s profits only in China, until the expected return to normality. The fourth — and more original — choice consists in taking the risk out of China by using a “China +1” strategy: diversifying one’s operations in South-East Asia with one’s long-standing private Chinese partners.
Clear insight has to come into play.